Cereals 2015: Five tips to reduce risk in your farm business

In a volatile world, managing risk is increasingly important to ensure the long-term viability of a farming business.

Jonathan Armitage, head of agri-business at Bidwells, suggests farmers take some time to stand back, review their business and think about the next 25 years or more.

This can be daunting, so knowing where to focus your energies is important. Mr Armitage shares his tips:

1. Maximise the performance of your assets

Understand the assets you have and how best to use them – whether it be land, buildings or environmental assets. For example, if an area of land is not very productive, it may be better used for an environmental stewardship scheme. Likewise, are there local developers looking to pay landowners to offset environmental or ecological damage like loss of habitats?

Think about how to invest in your assets and in a way that will secure your future profitability. For example, should you invest in crop storage, irrigation, reservoirs, drainage perhaps?

At some point, making that investment is about taking a leap and making a strategic decision.

2. Review your business structures

Make sure your business is structured in a way that is appropriate for the size of your farming operation and your family situation, who owns what and your succession plans. 

The structure you have today will probably be a result of historic family factors and tax-saving decisions, which may not be relevant anymore. Changing this may mean a consolidation, expansion or a movement into contract farming perhaps. Look back at why your business is structured the way it is and then ensure it is fit for the present and future developments.

3. Consider your subsidy dependency and new opportunities

Subsidies are likely to reduce over time and will also change to focus more on rural development and the environment.

Decreasing your cost base will reduce your dependency on subsidies, but also think about how you can take advantage of the new direction of subsidies.

Farmers will need to be more imaginative under the new environment schemes than with ELS and HLS in order to qualify for the payments. The most successful applications will be well-planned and integrated into the farm business, putting as much into environmental management as cropping management and treating it as another income stream.

4. Have a crop strategy with a market in mind

Look to spread and reduce your risk by producing for a specific market rather than just commodities.

This means producing the right crop, for the right market and being able to produce the right product to the desired time and quality. For example, instead of producing feed wheat, if the land allows you might look to produce for the biscuit quality market, or high uric acid rape seed for pharmaceuticals, or malting barley for a brewer.

Ensure your land is able to maintain production for the long term with good soil management and rotations.

5. Invest in people for now and the future

Modern farming means a business in now more reliant on the skills of fewer people – so make sure you have the right people in your business and are continuing to skill them for the future. This might mean attracting talent from outside of farming.

Ensure you have the right people to replace you – a farming business should have a good succession plan within the team just like any other business – and where knowledge is passed on, not just stored in one person’s head.

For more news, photos, video and information at the Cereals event see our Cereals 2015 page

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